I canceled my cable. So last week I was watching the national news on PBS feeling connected to the pulse of America (lol). The overwhelming top news, 3 nights in a row, was how the U.S. central bank ("The Fed") was pumping money into the stock market to artificially keep it afloat because a huge amount of loan companies were going under because people they gave cheap (predatory) home loans to weren't paying their bills.

Now my pops has been saying that America is artificially pumped up on debt (credit cards, loans, etc...) and that the bubble is bound to pop eventually. The move the government made to save face though begs the question, how much money do they have to spend on saving face? Of course saving face is key to maintaining an image, and an image is key to getting investment (as anyone who's ever walked into a bank looking for a loan knows). But what's the long term plan? Is it just to save face?

Essentially it's a race of patience... the government has enough money to artificially pay people's loans (or make it look like people are paying their loans) in order to save face, but how long can it keep that up?

Here's a great fictional memo set in 2020, describing how it was neither China nor Iraq that brought the end of the empire, rather it was this currently underreported subprime/predatory lending loan crisis.

(FPIF) Memo to the President, 2020: As a member of the transition team, I've been asked to give a backgrounder on the "loss of global influence" issue that played such a major role in the last election. I've submitted my study entitled End of Empire and I would encourage you to read my full analysis. I've been told that you might not have the time to read all three volumes. As a historian, I find it extraordinarily difficult to boil this question down to 750 words. But I will try.

Historians are divided into roughly three camps on the causes behind the end of the unipolar system headed by our country. The largest camp is the Iraq Syndrome group. They argue that the U.S. decision to invade Iraq in 2003 was the critical, history-changing moment. As you well know, the invasion turned into an unsuccessful 10-year occupation that sapped the U.S. economy and significantly eroded U.S. reputation in the world. More damaging, however, was the syndrome that followed the war. The unpopularity of the war made it increasingly difficult for the United States to launch military operations and virtually impossible to solicit international support. Although the Democrats tried to maintain high military budgets through 2010, they ultimately had to make significant cuts in order to salvage the economy.

The second camp is generally called the China Rising group. These historians, influenced by the world-systems work of Wallerstein, locate the end of U.S. influence in shifting geopolitical power and particularly the growing influence of China. As of February 2019, the Chinese economy is now larger than ours, though we still maintain a lead in per-capita GNP. More importantly, China's turn toward multilateralism in the early part of this century caught us by surprise. The transformation of the Shanghai Cooperation Organization (SCO) into the premier international security mechanism, with its own peacekeeping forces and development bank, undercut both NATO and traditional U.S. bilateral alliances. When the EU became a member of the SCO in 2014, the transatlantic alliance was effectively over.

The Iraq Syndrome and the China Rising arguments are familiar and persuasive. But I do not believe that they fully explain our fall. The third camp, to which I belong, is called the Subprime group. Although we are currently considered revisionist historians, I believe that my End of Empire books definitively establish that the financial crisis that the United States experienced in 2007 was the key element in destroying our position in the world.

As you might remember, the United States experienced a significant housing bubble beginning in 2001. Americans became obsessed with buying houses, and selling houses. The banks devised a way of lending money to people who ordinarily would not have enough credit to buy a house. This was called the sub-prime loan. Without going into the details -- please see Chapters 2-8 in Volume One of End of Empire -- I will simply remind you of the rising number of foreclosures in the summer of 2007, the bankruptcy of lenders, the failure of hedge funds, the collapse of retail, the devaluation of the dollar, and the coordinated global bank interventions that turned out to be only a stopgap measure.

At the time, U.S. economists predicted that the housing market would recover by 2009. That didn't happen. The subprime crisis revealed not only the underlying fragility of the domestic U.S. economy but the global economy as well. It is a common fallacy to draw parallels between household economics and the functioning of the national economy. However, in this case, I have argued that the parallel did apply. Average Americans, with their large amounts of debt, had to give up their prized possessions, that cornerstone of the American dream, the house. So, too, did the United States, with its nearly $9 trillion national debt, have to give up its global position, its "house" so to speak.

Historians in the two other camps overlook this simple and rather elegant explanation. Yes, the Iraq War was a tremendous drain on U.S. resources and thus a classic case of imperial overstretch. Yes, China played the multilateral card at just the right time and thereby built an international reputation. But it was a handful of greedy mortgage lenders that served as the catalyst. The market correction that followed the subprime crisis in fact turned out to be a much larger geopolitical correction that restored a certain balance to international affairs. Finally, with 2020 hindsight -- to use this year's most popular catch phrase -- we can see that Iraq and China pale in comparison to the cold, hard bottom line. As you repeatedly said on the campaign trail, quoting one of last century's most enduring lines, "It's the economy, stupid." (source)